Economic Stability and Climate Resilience: Key Focus of IMF’s Recent Mission to the Maldives

An International Monetary Fund (IMF) staff mission led by Ms. Piyaporn Sodsriwiboon recently concluded its 2024 Article IV consultation with the Maldives, held from January 23 to February 6, highlighting the nation’s post-pandemic economic recovery and addressing its fiscal and external vulnerabilities. The mission’s findings, which are preliminary and subject to IMF management approval, will be compiled into a report for further discussion and decision by the IMF’s Executive Board.

The Maldives has experienced a notable economic rebound following the pandemic-induced downturn, with a growth rate of 13.9 per cent in 2022 and an estimated 4.4 per cent in 2023. Growth is projected to continue at 5.2 per cent in 2024, driven by an increase in tourist arrivals and the expansion of the Velana airport terminal and hotel accommodations. However, the IMF mission has identified significant fiscal and external vulnerabilities that pose risks to the country’s economic stability and sustainability.

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The mission emphasized the need for sustained fiscal consolidation and tighter monetary and macroprudential policies to mitigate these vulnerabilities and ensure the sustainability of public finance and debt. The Maldivian authorities have been commended for developing an ambitious fiscal reform agenda aimed at addressing these challenges through measures such as subsidy reforms, healthcare reform, rationalization of the public sector investment program, and state-owned enterprises (SOEs) reforms.

The IMF staff also highlighted the importance of monetary policy adjustments and the discontinuation of advances from the Maldives Monetary Authority (MMA) to strengthen the country’s financial safety net and address macroeconomic vulnerabilities. Enhancements in fiscal institutions, public financial, and debt management frameworks were recommended to improve the effectiveness of fiscal policy.

Given the Maldives’ high vulnerability to climate change and natural disasters, the mission stressed the significance of strengthening institutions to support climate adaptation and mitigation efforts. This would enable access to additional climate financing and help the country deliver on its climate pledges. Furthermore, improvements in the business climate, governance, and skill development were identified as crucial for fostering strong, inclusive, and sustainable growth.

During their visit, the IMF team engaged in discussions with key Maldivian officials, including Finance Minister Mohamed Shafeeq and Governor Ali Hashim, as well as representatives from the private sector, bilateral donors, and development partners. The mission expressed gratitude for the candid discussions and hospitality extended by the Maldivian authorities and other stakeholders.

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